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St. Jude Medical to Acquire Chronic Pain Solutions Maker

St. Jude Medical Inc. (STJ) revealed that it will acquire privately held chronic pain solutions maker NeuroTherm for cash payment of roughly $200 million. The acquisition will boost St. Jude Medical’s chronic pain portfolio as NeuroTherm uses minimally invasive radiofrequency ablation (:RFA) for treating spinal pain, which the company does not provide.

RFA is a medical procedure aimed at reducing back pain by pinpoint application of heat using radio frequency waves on nerves around the facet joints. With this, it helps destroy the ability of the nerves to send pain signals to the brain, a process known as ablating the nerves.

RFA technique is used for over 25 years for interventional pain therapy to chronic pain patients. About 1.5 billion people around the world suffer from chronic pain. Last year, there were 230 million patients in the U.S. suffering from chronic pain.

NeuroTherm uses multi-lesion RF generator for continuous delivery of energy to each site resulting in complete treatment of each targeted spinal nerve. NeuroTherm’s products are available in more than 65 countries. Its facilities are located in the metro-Boston area, Amsterdam, Dusseldorf, and London.

St. Jude Medical expects to complete the acquisition by the end of the third quarter. The acquisition of NeuroTherm is expected to contribute $10 to $15 million to St. Jude Medical’s sales in 2014. Further, the acquisition is expected to be neutral to St. Jude Medical’s earnings per share in 2014 but accretive thereafter.

Recently, St. Paul, MN-based St. Jude Medical also completed its acquisition of privately-held CardioMEMS, Inc. following the U.S. Food and Drug Administration (:FDA) clearance of the CardioMEMS HF System in May this year. With the closure of the CardioMEMS acquisition, St. Jude Medical expects accelerated growth in its cardiovascular segment.

The CardioMEMS HF System is a first-of-its-kind FDA-approved heart failure monitoring device that has been proven to significantly reduce heart failure-related hospitalizations. It has set a new treatment paradigm for heart failure that reduces the need for hospitalizations.

The CardioMEMS HF System has already obtained the CE Mark approval in the EU. St. Jude Medical now plans to initiate the system’s strategic launch in the U.S.

For full year 2014, St. Jude Medical upgraded its revenues guidance to the range of $5,610 to $5,760 million from the prior range of $5,600 to $5,750 million. It also upgraded its adjusted earnings per share guidance to $3.95–$4.00 from the prior range of $3.94–$3.99. The current Zacks Consensus Estimate for earnings per share and revenues for the year are pegged at $3.98 and $5,701 million, respectively.

Currently, St. Jude Medical carries a Zacks Rank #2 (Buy). Some better-ranked stocks in the medical products industry include Hospira Inc. (HSP), OraSure Technologies, Inc. (OSUR), and CareFusion Corporation (CFN). Both Hospira and OraSure Technologies sport a Zacks Rank #1 (Strong Buy), while CareFusion carries the same rank as St. Jude Medical.

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